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Pre-market update (updated 9am eastern):

  • Europe is trading 0.4% higher.
  • Asian markets traded 1.0% higher. 
  • US futures are slightly higher ahead of the opening bell. 

Economic reports due out (all times are eastern): MBA Purchase Applications (7am), Housing Starts (8:30am), EIA Petroleum Status Report (10:30am)

Technical Outlook (SPX):

  • Solid continuation after the market yesterday, extend the market's bounce to a second day. 
  • Multiple ways to look at this market... I'll detail both perspectives
  • Technically, we are in a downtrend. Since September highs, we have 1) formed a slightly lower-high 2) formed a subsequent lower-low 
    • This creates a SLIGHT downtrend, but the channel is barely trending lower. 
  • On the other hand, considering the larger uptrend that we are in from the 6/4 lows, one could consider this to be a developing bull-flag before moving higher. 
  • I'd recommend not drawing a conclusion on either scenario. 
  • Instead I'd wait for it to break out/down of the channel that has formed to determine ultimate market direction. Until then be nimble. 
  • SPX bounced perfectly off of the 50-day moving average and is set to challenge the 10 and 20-day moving averages as well. 
  • Any move to the upside should be considered a dead cat bounce. The only way this changes is if we can push and close above 1469. 
  • We confirmed the double-top pattern on SPX and closed below critical support at 1430 on Friday. 
  • Ultimately, we need to start focusing more on short opportunities particular on a dead cat bounce that takes price close to key resistance levels on individual equities, and offering ideal risk/reward setups. 
  • We have broken the long-term trend-line off of the 6/4 lows. That is no doubt problematic for bulls. 
  • VIX dropped back below 16. 
  • Fed's QE3 launch is going to add a lot of buying power to this market and drive more people out of interest-bearing assets and into equities in search of some kind of return. 
  • One area of concern is the 3 large gaps off of the 6/4 lows that remain unfilled, including 6/6, 7/26, 8/3

My Opinions & Trades:

  • Sold SHLD at $62.17 from $56.15 for a 10.7% gain.
  • Sold LMCA at $110.99 from $107.00 for a 3.7%
  • Sold HAL at $34.39 from $34.17 for a 0.6% gain. 
  • Shorted BLL at $42.32. 
  • Bought MCD at $94.00. 
  • Remain long AAPL at $637.69. 
  • Remain short DRC at $52.38 and CPRT at 27.00
  • Track my portfolio RealTime here.

Charts:

SP 500 Market Analysis 10-17-12

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ryan1Ryan (@shareplanner) specializes in swing trading strategies and is the founder of SharePlanner which he created to help and teach others on how to trade stocks better using multiple approaches and time frames. Each day you can count on Ryan to provide his trading advice as well as transparency in every trade that he makes. Ryan Mallory resides in Central Florida with a wife of seven years as well as one lively son. More >>

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